Morgan Stanley expects lawsuit from NY Attorney General

NEW YORK — Morgan Stanley, which agreed to a $2.6 billion settlement with the federal government last week, says it expects to be sued by New York Attorney General Eric Schneiderman over subprime mortgage bonds.

The investment bank says it was told about the lawsuit in January and that it will involve about 30 subprime securities. Morgan Stanley say the lawsuit will say that it misrepresented or omitted important information related to the loans, including Morgan Stanley’s due diligence and the valuation of the loans in the bonds, as well as the properties securing them.

Morgan Stanley disclosed the potential lawsuit in a form filed with the Securities and Exchange Commission. The New York Attorney General’s office declined to comment.

On Wednesday Morgan Stanley said it would pay $2.6 billion to settle with the federal government over its role in the mortgage bubble and subsequent financial crisis.

Over the last two years Wall Street banks have paid tens of billions of dollars to settle state and federal charges that they misrepresented the risk subprime mortgage bonds represented to investors. Bank of America reached a $16.7 billion settlement with the Justice Department over its role in the financial crisis, and JPMorgan Chase agreed to pay $13 billion.

Morgan Stanley reached smaller settlements with other federal and state agencies in the last two years, including a $1.25 billion payment in 2014 to the Federal Housing Finance Authority over mortgages it sold to the government-sponsored mortgage companies Fannie Mae and Freddie Mac.

Shares of Morgan Stanley rose 17 cents to $35.96 in afternoon trading. The stock has fallen 7.8 percent in 2015.